During Shakespeare's time, the issue of being "gay" was not treated the same way as it is today. What is also different is the fact that strong friendships between men were not stigmatized as gay the way they might be now. Male characters could say that they loved their friends without anyone thinking anything was unusual. Declaring love for a friend was a declaration of loyalty, and it was quite common for one man to say that he loved another. It did not imply that either party was homosexual.

That being said, it is a matter of interpretation as to whether you could read the character of Iago as gay. Many critics do make that suggestion from clues they find in the text, but many do not read the story that way at all. One thing Shakespeare does tell us is that Iago is jealous of Othello, but this does not necessarily imply sexual jealousy. Rather, Iago clearly indicates that he is jealous because Othello has promoted Cassio over Iago, who has been a loyal soldier to Othello for longer than Cassio has even known Othello. Iago also implies that Othello may have had an affair with Emilia, but no proof is ever given of that. Because of these two beliefs of Iago's, he determines that he is going to destroy Othello's life, no matter what it takes, and he does succeed in doing so, taking several other victims with him in his desire for revenge.